Oil Prices Slip Despite Lukoil Declaring Force Majeure in Iraq

Crude oil prices opened lower today even after Russia’s Lukoil declared force majeure on its operations in one of Iraq’s biggest oil fields because of the latest U.S. sanctions.

At the time of writing, Brent crude was trading at $63.84 per barrel, with West Texas Intermediate at $59.89 per barrel, as reports suggest record high volumes of oil in floating storage, following Washington’s latest sanction salvo against Moscow.

Reuters reported on Monday, citing unnamed sources, that Lukoil had declared a force majeure on the West Qurna-2 field, which produces some 400,000 barrels of crude daily. Following the October 22 U.S. sanctions on Lukoil and Rosneft, Iraq had stopped all cash and crude payments to Lukoil, the sources told the publication. The Russian major has a 75% stake in the field.

Even so, the dominant sentiment on oil markets continues to be bearish thanks to projections of an oversupply. “As OPEC production increases grind on, global oil balances are acquiring an increasingly bearish hue on the supply side of the ledger with demand still trending lower in conjunction with a slowed economic growth path among major oil-consuming countries,” one outlet that shares the sentiment, Ritterbusch and Associates, said in a note as quoted by Reuters.

President Trump, meanwhile, said that he was close to closing a trade deal with India, noting that the latter had “stopped doing the Russian oil — it’s been reduced very substantially,” as quoted by Bloomberg.

Now, oil traders would be awaiting OPEC’s latest monthly report, scheduled to be released tomorrow and coinciding with the International Energy Agency’s own monthly report. Both are likely to stick to their demand and supply projections, where OPEC sees demand as much stronger than the IEA, and the IEA expects a massive supply overhang, where OPEC sees a market more or less in balance.

By Irina Slav for Oilprice.com

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